Sunday, November 21, 2010

The Human Cost Of Sanctions On Iran

By Hani Mansourian*
Posted by admin on Nov 03, 2010
Courtesy Of "Al-Muftah"

In a 1996 interview with 60 Minutes, Madeline Albright, then Secretary of State under Bill Clinton, was asked about the impact of U.S. sanctions on Iraq. Implemented in response to Iraq’s invasion of Kuwait in 1990, the sanctions had crippled Iraq’s economy and devastated its civilian population. Unofficial figures from the United Nations, as well as other organizations, estimated that at least half a million children had died as a result of these sanctions.[1] This led 60 minute correspondent, Leslie Stahl, to ask Albright whether the intended outcomes were worth the human cost. Albright responded, “I think this is a very hard choice. But the price … we think the price is worth it.”
Hans von Sponeck, the U.N. Humanitarian Coordinator in Iraq from November 1998 to February 2000, disagreed profoundly. Following 30 years of service, von Sponeck resigned from the U.N., citing as his reason “the continuation of a sanction[s] regime in Iraq despite overwhelming evidence that the fabric of Iraqi society is swiftly eroding and an international awareness that the approach chosen so clearly punishes the wrong party.”[2] Worse still, the price paid by the Iraqi people never brought about the changes for which Secretary Albright and others had hoped.  Instead, it took the 2003 U.S. invasion of the country to bring about the long-desired outcome of toppling Saddam Hussein’s government.
Ten years after von Sponeck’s resignation, the world faces a similar dilemma in dealing with Iran. Having “resolved” the problem of Iraq, the international community has turned its attention to thwarting Iran’s alleged nuclear ambitions. A member of the Non-Proliferation Treaty since 1958, Iran has asserted that its nuclear program is intended for peaceful and civilian purposes, but the international community, particularly the United States, rejects the claim. In recent months the U.N.the United States, and the European Union have implemented new rounds of sanctions, designed to place pressure on the Islamic Republic’s economic activities.  The term “smart” sanctions has been employed to suggest that these measures, unlike the comprehensive sanctions imposed on Iraq in the 1990s, will only target the Iranian government and its key economic and military operatives including the Islamic Revolutionary Guard Corps (IRGC).  As of this writing, various official and unofficial companies with links to the Iranian government and/or the IRGC have been specifically targeted by these measures.
By arguing that “smart” or “targeted” sanctions will not have a major impact upon the general Iranian population, the international community has avoided a deeper discussion on the human costs of sanctions.  Indeed, current debates surrounding sanctions on Iran, whether in the mainstream media or academic circles, mainly focus on the efficacy of these measures in forcing Iran to comply with the demands of Western governments.  Nonetheless, given the failure of indiscriminate sanctions in Iraq and “smart” sanctions in Zimbabwe,[3] it is relatively simple to argue that sanctions are unlikely to dislodge the Iranian government from its position. In fact, many analysts have already skillfully refuted the U.S. government’s claims regarding the effectiveness of the sanctions program.  The more damning and much less debated aspect of these sanctions is their probable impact on the general population.
Dissecting the Case for Sanctions
In general, arguments in favor of sanctions are mainly based on their successful use in bringing down the apartheid regime of South Africa in the 1980s. Many analysts, however, have shown that these sanctions would not have been as effective in the absence of other significant factors. For example, by the time the European Community imposed significant sanctions on South Africa and the U.S. Congress passed the Comprehensive Anti-Apartheid Act in 1986, South Africa’s economy had already been greatly weakened by the divestment movement and the flight of private capital as a result of years of internal conflict and insecurity. As such, the claim that sanctions single-handedly brought an end to South Africa’s apartheid regime is at best a confusion of correlation and causation.
Arguments against sanctions are often based on more recent cases, namely, Iraq in the 1990s and Zimbabwefrom 2001 onwards.[4] In both cases, sanctions failed to bring about the desired outcome of regime change. In fact, rather than becoming less authoritarian and more democratic, both governments escalated their repressive policies against domestic opposition groups.  While blaming their economic problems on the outside world, these regimes managed to consolidate their grip on power. When the United States invaded Iraq after 13 years of “crippling” sanctions, Saddam was still firmly in power. Similarly, nearly nine years since sanctions were imposed on Zimbabwe, President Robert Mugabe is still defying international pressure to abide by his commitments, including the power-sharing deal he signed in 2008 with the opposition party,Movement for Democratic Change (MDC).
Despite differences between their economies, power structure and the types of sanctions imposed upon these countries, the populations of both Iraq and Zimbabwe suffered profoundly as a result of economic sanctions. Both populations grappled with massive unemployment, lack of food and other basic commodities and an ever widening gap between the rich and the poor. By November 1997, nearly one million children were malnourished in Iraq, including 32% of children under the age of five, an astonishing 72% increase from 1991. A host of imprudent policies in Zimbabwe, including rapid land reform, led to one of the greatest instances of hyperinflation in history. By 2005, even before the economy hit rock bottom, the purchasing power of the average Zimbabwean fell “to the same level[s] as in 1953.” Eight years into the sanctions program, approximately 75% of Zimbabwe’s population (estimated at 12 million) depends upon food assistance from government and UN agencies.   In both cases, opportunistic politico-economic elites who benefited from government support took advantage of the environment created by the sanctions to increase their predatory activities. In Zimbabwe, an expansive black market grew rapidly to which only those with means had access. In Iraq, trade back-roads developed that enriched government insiders.
As a result of these devastating effects on the general population, social cohesion and a sense of community greatly deteriorated in both countries, in turn decreasing the likelihood that the massive popular uprising Western governments had hoped would be inspired by these economic sanctions would ever occur.
The Likely Impact of “Smart” Sanctions on Iran: The Rise of Para-Governmental Economic Actors
The “smart” sanctions recently deployed against Iran are primarily aimed at curbing the economic activities of para-governmental economic entities, with the main emphasis being on the IRGC. Despite this intension, the sanctions will in all likelihood boost the influence of these actors on the Iranian economy.
The IRGC’s activities have historically been centered on construction, engineering, and manufacturing, as well as transactions in the black market.[5] The one hurdle standing in the way of IRGC monopolies in these markets has been the existence of competition (however insignificant) from multinational companies and some domestic private contractors. Following the imposition of the latest sanctions regime, multinationals are leaving the country and many private domestic companies are finding it difficult to function in Iran’s unstable business environment. Some of these domestic actors are even on the verge of bankruptcy due to major fluctuations in the value of the rial, arguably caused by the sanctions.
To take one example of the IRCG’s economic rise, in early October 2010, the single largest road construction contract in Iran was granted to Khatam al-Anbia, a subsidiary of the IRGC. Worth approximately $13-15 billion, the contract calls for the building of a 1,100-kilometer road connecting Qom to Mashad, the two most important religious cities in Iran. In order to facilitate investment activities like these, the IRGC has also been focusing its efforts on building its internal financing capabilities; in September 2010, the Council of Finance and Credit announced that Ansaar Financial Institute, a subsidiary of the IRGC, would become a full-blown bank. As the sanctions continue to strangle Iran’s business environment, we are likely to continue witnessing anunprecedented expansion of the IRGC’s role in the country’s economy.
The pseudo-privatization process that started in the 80s—and entered a new phase in 2006—has led to the growth of many para-governmental economic giants including but not limited to the IRGC. Given the semi-governmental stature and economic significance of these actors, sanctions have provided these organizations with economic advantages similar to those of the IRGC. The flight of international investment coupled with a further weakening of the private sector will allow these “state and … semi-private institutions to wield even more influence over the economy.”
Shouldering the Cost of Sanctions: Wide-Spread Negative Effects on Regular Iranians
Given these current realities and likely future outcomes, there can be little doubt that the civilian population of Iran, and not its government, will bear the brunt of the sanctions.
The impact of the sanctions has and will likely continue to have far-reaching effects on the Iranian economy.  As has already been evident, in the short-term the country’s economy will be pervasively damaged by the flight of private capital, stagnation (potentially coupled with inflation) and insufficient foreign exchange reserves to maintain a low exchange rate. In the short time since the sanctions were imposed, many Iranians have already felt the effect of “unsteady supply chains and disrupted exports.”
These short-term effects, in turn, will inevitably lead to significant budget deficits, which will necessitate cuts in government spending that will inevitably have more long-term effects on the country and population at large. The history of sanctions illustrates that non-democratic governments are unlikely to respond to economic pressure by cutting spending in areas they deem necessary to maintaining their power, such as defense and intelligence programs. As such, the first layer of economic cuts are usually applied to government-supported public sector programs, such as education and healthcare. In the 1980s, Iraq had the best education system in the Arab world and a primary school enrollment rate of 100%.[6] By the year 2000, multiple wars and lack of investment in the education system left 23.7% of children between the ages of 6-11 out of school.[7] “A sharp decline in adult female literacy rates [in Iraq] since the mid 1980s, from 87% in 1985 to … 45% in 1995” has also been documented.[8]
Job creation, particularly for Iran’s burgeoning young population, is one area that is likely to be particularly damaged by sanctions.  As demonstrated by Professor Djavad Salehi-Isfahani, the Iranian job market is experiencing enormous pressure from new entrants (aged 20-24), with the ratio between those entering and exiting the job market entrants (20-24/60-64) reaching unprecedented levels.[9] In its current state, the Iranian economy is unable to create jobs at the rate necessary to meet the growing demand and sanctions will only exacerbate this situation. As a result of the sanctions, Iran’s youth will likely experience an even longer “waithood”[10] period, the time between the completion of higher education and the beginning of formal “adulthood” for the country’s youth. Traditionally, Iran’s youth has spent this period economically dependent upon their families, with many often continuing to live in their parents’ home; as the economy further stagnates, those parents will be less able to provide for their adult children during this extended waiting period.
Such a large, unemployed population of disaffected youth has the theoretical potential to be a politically destabilizing force.  Many have argued that this is exactly what the sanctions are meant to achieve, namely, to push Iran’s population to the point of rebellion. According to proponents of this viewpoint, the adverse impact of sanctions upon the Iranian youth will push them to rise up and topple the regime. Naïve at best and disingenuous at worst, this argument fails to take into account not only historical evidence from both Zimbabwe and Iraq, but also two crucial factors specific to Iran.
First, young Iranians have already taken to the streets on several occasions over the past two decades, most recently forming the backbone of the peaceful Green Movement that developed following the country’s disputed June 2009 Presidential election.  As the world watched, these protestors were brutally crushed by the Islamic Republic’s security forces. Those who were not killed or injured on the streets were more often than not brutalized in the country’s over-crowded political prisons. As a result of this most recent crackdown, many young men and women have been sidelined politically, while others battle debilitating depression and despair.  Further economic pressure on this segment of the population and its support networks is likely only to exacerbate their state of disillusionment and lead to a greater exodus of youth from the country. Under these circumstances, mobilization on a mass scale is unlikely to be an engine for meaningful change in the country.
Second, sanctions-related restrictions on imports of necessary goods, including agricultural products, have led to soaring prices for basic commodities.  As formal pathways for trade and financial transactions are blocked, unofficial routes have opened to ensure a minimum supply of commodities necessary for the government’s operation and the public’s needs. Although black markets may not fully compensate for restricted trade routes, they create a lucrative and predatory business environment, allowing opportunistic individuals and entities to charge exorbitant amounts for their services. As a result, middle class families in Iran are facing ever-increasing costs for the purchase of basic goods. The adverse effect on small business owners as a result of these price-squeezes is also likely to become increasingly evident.  These negative effects on the middle and lower-middle class have the potential to limit the continued growth of the well-educated, young population that has historically been the well-spring of change in the country.
Given the potential for rising unemployment, increasing prices on basic goods, decreasing investment in public services such as health and education and a reduction in the production of raw materials crucial to Iran’s economy (like oil), the Iranian middle class and youth population will face major hardships. As such, they are decidedly unlikely to rise up and challenge their government, as so many proponents of Iran sanctions have hoped.[11]
Many years of sanctions coupled with sub-optimal economic policies in Iran have resulted in a weak economy and a fragile middle-class. The latest round of UN, U.S., and EU sanctions on Iran is likely to drive millions into poverty and destitution. As economic opportunities for the growth of a solid middle-class disappear, the young Iranians that have historically been the agents of change in the country will lose their social base.  Ironically, then, sanctions may do more to increase the power of the Iranian government and to weaken the domestic opposition movement, to the ostensible detriment of U.S. interests
*Hani Mansourian is a graduate of the School of International and Public Affairs at Columbia University. He is currently an associate at the Columbia Group for Children in Adversity.

[1] The figure of half a million excess death among children under the age of five in Iraq began floating around after a U.N. Food and Agriculture Organization (FAO) preliminary report came out in 1995. This figure was repeatedly challenged until 1999, when the authoritative UNICEF study confirmed the figure of 500,000 for the period of 1990 to 1998.
[2] von Sponeck, H.C., A Different Kind of War: The UN Sanctions Regime in Iraq, p. 278
[3] While Iraq was under “crippling” or “blanket” sanctions from 1990 to 2003, the U.S. attack on Iraq unofficially put the sanctions on hold. Zimbabwe has been subject to “smart” sanctions by the United States since 2001 and by the EU since 2002.
[4] Western pressure upon Zimbabwe began with its involvement in 1998 in the Second Congo War. In 2001, the Zimbabwe Democracy and Economic Recovery bill was introduced in the U.S. Senate, becoming law in December of that year.
[5] The Rise of the Pasdaran: Assessing the Domestic Roles of Iran’s Islamic Revolutionary Guards Corps, RAND Corporation, pp. 59-70 (2009).
[6] Background Paper: Education in Iraq, U.N. Office of Humanitarian Coordinator for Iraq (May 2003).
[7] The Situation of Children in Iraq, UNICEF (Mar. 2003).
[8] Velloso de Santisteban, Augustin, Sanctions, War, Occupation and the De-Development of Education in Iraq, p. 64.
[9] Salehi-Isfahani, Djavad, Iranian Youth in Times of Economic Crisis, The Dubai Initiative (Sept. 2010).
[10] Ibid.
[11] Ibid.